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The Zacks Analyst Blog Highlights: Discover Financial Services, Harley-Davidson, Toyota Motor, Ford Motor and General Motors

Zacks Equity Research

For Immediate Release
Chicago, IL – October 18, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Discover Financial Services Inc. ( DFS- Free Report), Harley-Davidson Inc. ( HOG- Free Report), Toyota Motor Corp. ( TM- Free Report), Ford Motor Co. ( F- Free Report) and General Motors ( GM- Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free .

Here are highlights from Thursday’s Analyst Blog:

Can Discover (DFS) Keep Earnings Streak Alive?
We expect the direct banking and payment services company Discover Financial Services Inc. ( DFS- Free Report) to beat expectations when it reports third quarter 2013 results on Oct 21.

Why a Likely Positive Surprise?

Our proven model shows that Discover Financial is likely to beat earnings because it has the right combination of two key ingredients:

Positive Zacks ESP: Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 1.68%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Discover Financial’s Zacks Rank #2 (Buy) and 1.68% ESP makes us very confident in looking for a positive earnings beat on Oct 21.

What is Driving the Better Than Expected Earnings?

Curbing interest rates on student loans, closing the acquisition of Home Loan Center and business expansions through alliances with EMVCo and Paydiant are expected to aid Discover Financial’s earnings in the upcoming quarter. Also the launch of Home Equity Loans to bridge the gap between its personal and home loans is expected to drive better earnings in the upcoming quarter.

Discover Financial posted earnings surprise in the last two quarter with an average beat of 11.1% aided by growth in card sales volume. A lower share count due to share repurchase activities also aided the upside.
Harley Recalls 2014 Touring Motorcycles
Harley-Davidson Inc. ( HOG- Free Report) is recalling some 2014 Touring motorcycles to fix a hydraulic clutch system that may create safety issues. The company is recalling 25,185 Touring motorcycles of models FLHTCU, FLHTK, FLHTP, FLHX, FLHXS, FLHTKSE and FLHRSE. It is also recalling 3,861 Softail CVOs and Trikes, models including FLHTCUTG, FXSBSE and FLSTNSE, manufactured from May 3, 2013, to Oct. 14, 2013.

It is feared that the hydraulic clutch system may be unable to generate enough lift to disengage the clutch in some cases.  In this situation, reducing the speed of the motorcycle or stopping it might be difficult. This might lead to an accident.

Harley-Davidson is also taking the initiative to issue a Do Not Ride notice to the customers and a Do Not Deliver notice to the dealers until the motorcycle is repaired. Once a customer contacts the company’s dealer, Harley-Davidson will complete the necessary inspection and repair in less than an hour. The owners don’t have to bear any charges for the repair.

Product recalls can seriously dent a brand’s image. Recalls, amid the competitive scenario, will adversely affect the company’s brand value.

However, Harley-Davidson is not alone in recalling products. In Sep 2013, Toyota Motor Corp. ( TM- Free Report) recalled 615,000 Sienna minivans in the U.S. The automaker is recalling the vehicles of model years 2004-2005 and 2007-2009 to fix a problem in the shift lever assembly.

Currently, Harley-Davidson retains a Zacks Rank #3 (Hold). In the same industry, Ford Motor Co. ( F- Free Report) and General Motors ( GM- Free Report), each carrying a Zacks Rank #2 (Buy), are worth a look at the moment.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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